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Apple Reports Fourth Quarter Results

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Apple(R) today announced financial results for its fiscal 2014 fourth quarter ended September 27, 2014. The Company posted quarterly revenue of $42.1 billion and quarterly net profit of $8.5 billion, or $1.42 per diluted share. These results compare to revenue of $37.5 billion and net profit of $7.5 billion, or $1.18 per diluted share, in the year-ago quarter. Gross margin was 38 percent compared to 37 percent in the year-ago quarter. International sales accounted for 60 percent of the quarter’s revenue.

Apple’s board of directors has declared a cash dividend of $.47 per share of the Company’s common stock. The dividend is payable on November 13, 2014, to shareholders of record as of the close of business on November 10, 2014.

“Our fiscal 2014 was one for the record books, including the biggest iPhone launch ever with iPhone 6 and iPhone 6 Plus,” said Tim Cook, Apple’s CEO. “With amazing innovations in our new iPhones, iPads and Macs, as well as iOS 8 and OS X Yosemite, we are heading into the holidays with Apple’s strongest product lineup ever. We are also incredibly excited about Apple Watch and other great products and services in the pipeline for 2015.”

“Our strong business performance drove EPS growth of 20 percent and a record $13.3 billion in cash flow from operations in the September quarter,” said Luca Maestri, Apple’s CFO. “We continued to execute aggressively against our capital return program, spending over $20 billion in the quarter and bringing cumulative returns to $94 billion.”

Apple is providing the following guidance for its fiscal 2015 first quarter:

o revenue between $63.5 billion and $66.5 billion

o gross margin between 37.5 percent and 38.5 percent

o operating expenses between $5.4 billion and $5.5 billion

o other income/(expense) of $325 million

o tax rate of 26.5 percent

Apple will provide live streaming of its Q4 2014 financial results conference call beginning at 2:00 p.m. PDT on October 20, 2014 at www.apple.com/quicktime/qtv/earningsq414. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those about the Company’s estimated revenue, gross margin, operating expenses, other income/(expense), and tax rate. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company’s reaction to those factors, on consumer and business buying decisions with respect to the Company’s products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company’s gross margin; the inventory risk associated with the Company’s need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company’s business currently obtained by the Company from sole or limited sources; the effect that the Company’s dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company’s international operations; the Company’s reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company’s dependency on the performance of distributors, carriers and other resellers of the Company’s products; the effect that product and service quality problems could have on the Company’s sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Company’s financial results is included from time to time in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of the Company’s public reports filed with the SEC, including the Company’s Form 10-K for the fiscal year ended September 28, 2013, its Form 10-Q for the quarter ended December 28, 2013, its Form 10-Q for the quarter ended March 29, 2014, its Form 10-Q for the quarter ended June 28, 2014, and its Form 10-K for the fiscal year ended September 27, 2014 to be filed with the SEC. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

NOTE TO EDITORS: For additional information visit Apple’s PR website (www.apple.com/pr), or call Apple’s Media Helpline at (408) 974-2042.

(c) 2014 Apple Inc. All rights reserved. Apple, the Apple logo, Mac, Mac OS and Macintosh are trademarks of Apple. Other company and product names may be trademarks of their respective owners.

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except number of shares which are reflected in thousands and per share amounts)

Three Months Ended

Twelve Months Ended

September 27,
2014

September 28,
2013

September 27,
2014

September 28,
2013

Net sales $ 42,123 $ 37,472 $ 182,795 $ 170,910
Cost of sales (1) 26,114 23,601 112,258 106,606
Gross margin 16,009 13,871 70,537 64,304
Operating expenses:
Research and development (1) 1,686 1,168 6,041 4,475
Selling, general and administrative (1) 3,158 2,673 11,993 10,830
Total operating expenses 4,844 3,841 18,034 15,305
Operating income 11,165 10,030 52,503 48,999
Other income/(expense), net 307 113 980 1,156
Income before provision for income taxes 11,472 10,143 53,483 50,155
Provision for income taxes 3,005 2,631 13,973 13,118
Net income $ 8,467 $ 7,512 $ 39,510 $ 37,037
Earnings per share:
Basic $ 1.43 $ 1.19 $ 6.49 $ 5.72
Diluted $ 1.42 $ 1.18 $ 6.45 $ 5.68
Shares used in computing earnings per share:
Basic 5,933,845 6,329,139 6,085,572 6,477,320
Diluted 5,972,082 6,363,919 6,122,663 6,521,634
Cash dividends declared per common share $ 0.47 $ 0.44 $ 1.82 $ 1.64
(1) Includes share-based compensation expense as follows:
Cost of sales $ 116 $ 88 $ 450 $ 350
Research and development $ 314 $ 209 $ 1,216 $ 917
Selling, general and administrative $ 332 $ 258 $ 1,197 $ 986

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except number of shares which are reflected in thousands and par value)

September 27,
2014

September 28,
2013

ASSETS:
Current assets:
Cash and cash equivalents $ 13,844 $ 14,259
Short-term marketable securities 11,233 26,287
Accounts receivable, less allowances of $86 and $99, respectively 17,460 13,102
Inventories 2,111 1,764
Deferred tax assets 4,318 3,453
Vendor non-trade receivables 9,759 7,539
Other current assets 9,806 6,882
Total current assets 68,531 73,286
Long-term marketable securities 130,162 106,215
Property, plant and equipment, net 20,624 16,597
Goodwill 4,616 1,577
Acquired intangible assets, net 4,142 4,179
Other assets 3,764 5,146
Total assets $ 231,839 $ 207,000
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current liabilities:
Accounts payable $ 30,196 $ 22,367
Accrued expenses 18,453 13,856
Deferred revenue 8,491 7,435
Commercial paper 6,308 0
Total current liabilities 63,448 43,658
Deferred revenue – non-current 3,031 2,625
Long-term debt 28,987 16,960
Other non-current liabilities 24,826 20,208
Total liabilities 120,292 83,451
Commitments and contingencies
Shareholders’ equity:
Common stock and additional paid-in capital, $0.00001 par value: 12,600,000 shares authorized; 5,866,161 and 6,294,494 shares issued and outstanding, respectively 23,313 19,764
Retained earnings 87,152 104,256
Accumulated other comprehensive income/(loss) 1,082 (471)
Total shareholders’ equity 111,547 123,549
Total liabilities and shareholders’ equity $ 231,839 $ 207,000

Apple Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

Twelve Months Ended
September 27, 2014 September 28, 2013
Cash and cash equivalents, beginning of the year $ 14,259 $ 10,746
Operating activities:
Net income 39,510 37,037
Adjustments to reconcile net income to cash generated by operating activities:
Depreciation and amortization 7,946 6,757
Share-based compensation expense 2,863 2,253
Deferred income tax expense 2,347 1,141
Changes in operating assets and liabilities:
Accounts receivable, net (4,232) (2,172)
Inventories (76) (973)
Vendor non-trade receivables (2,220) 223
Other current and non-current assets 167 1,080
Accounts payable 5,938 2,340
Deferred revenue 1,460 1,459
Other current and non-current liabilities 6,010 4,521
Cash generated by operating activities 59,713 53,666
Investing activities:
Purchases of marketable securities (217,128) (148,489)
Proceeds from maturities of marketable securities 18,810 20,317
Proceeds from sales of marketable securities 189,301 104,130
Payments made in connection with business acquisitions, net (3,765) (496)
Payments for acquisition of property, plant and equipment (9,571) (8,165)
Payments for acquisition of intangible assets (242) (911)
Other 16 (160)
Cash used in investing activities (22,579) (33,774)
Financing activities:
Proceeds from issuance of common stock 730 530
Excess tax benefits from equity awards 739 701

Taxes paid related to net share settlement of equity awards

(1,158) (1,082)
Dividends and dividend equivalents paid (11,126) (10,564)
Repurchase of common stock (45,000) (22,860)
Proceeds from issuance of long-term debt, net 11,960 16,896
Proceeds from issuance of commercial paper, net 6,306 0
Cash used in financing activities (37,549) (16,379)
Increase/(decrease) in cash and cash equivalents (415) 3,513
Cash and cash equivalents, end of the year $ 13,844 $ 14,259
Supplemental cash flow disclosure:
Cash paid for income taxes, net $ 10,026 $ 9,128
Cash paid for interest $ 339 $ 0
Apple Inc.
Q4 2014 Unaudited Summary Data
(Units in thousands, Revenue in millions)
Q4’14 Q3’14 Q4’13 Sequential Change Year/Year Change
Operating Segments Revenue Revenue Revenue Revenue Revenue
Americas $16,247 $14,577 $13,941 11% 17%
Europe 9,535 8,091 8,005 18% 19%
Greater China 5,778 5,935 5,733 – 3% 1%
Japan 3,507 2,564 3,341 37% 5%
Rest of Asia Pacific 1,923 2,161 1,980 – 11% – 3%
Retail 5,133 4,104 4,472 25% 15%
Total Apple $42,123 $37,432 $37,472 13% 12%
Q4’14 Q3’14 Q4’13 Sequential Change Year/Year Change
Product Summary Units Revenue Units Revenue Units Revenue Units Revenue Units Revenue
iPhone (1) 39,272 $23,678 35,203 $19,751 33,797 $19,510 12% 20% 16% 21%
iPad (1) 12,316 5,316 13,276 5,889 14,079 6,186 – 7% – 10% – 13% – 14%
Mac (1) 5,520 6,625 4,413 5,540 4,574 5,624 25% 20% 21% 18%
iPod (1) 2,641 410 2,926 442 3,498 573 – 10% – 7% – 24% – 28%
iTunes/Software/Services (2) 4,608 4,485 4,260 3% 8%
Accessories (3) 1,486 1,325 1,319 12% 13%
Total Apple $42,123 $37,432 $37,472 13% 12%

(1)

Includes deferrals and amortization of related non-software services and software upgrade rights.

(2)

Includes revenue from the iTunes Store, the App Store, the Mac App Store, the iBooks Store, AppleCare, licensing and other services.

(3)

Includes sales of Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod.

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